32nd GST Council Meet Highlights

The 32nd Goods and Services Tax Council meeting announced a series of sops for taxpayers in its recent meet.The prime beneficiaries are the micro, small and medium enterprises (MSMEs), with recent changes.

What are the key changes?

Exemption threshold – The council approved doubling of the exemption threshold under GST regime to Rs 40 lakh.

States, however, will have the option to choose between the two exemption thresholds of Rs 20 lakh and Rs 40 lakh.

For the North-eastern and hilly states, the exemption limit has been increased from Rs 10 lakh to Rs 20 lakh.

Composition scheme – The annual turnover limit under composition scheme will be increased to Rs. 1.5 crores from current Rs 1 crore.

The special category states comprising of north-eastern states, J&K, HP and Uttarakhand are given one week time to decide upon the composition limit in their respective states.

The Council has also introduced a composition scheme for the services sector as well.

[Of the nearly 1.17 crore businesses registered under the GST, over 18 lakh have opted for composition scheme.

Under this, traders and manufacturers can pay taxes at a concessional rate of 1%, while restaurants pay 5%.

While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to pay taxes on a quarterly basis.

They are also not required to keep detailed records compared with a normal taxpayer under GST.]

Software – Free of cost accounting and billing software shall be made available to small taxpayers by GST Network (GSTN).

Real Estate – A seven-member group of ministers will be constituted in this regard.

It will examine the proposal of giving a composition scheme to boost the residential segment of the real estate sector.

Revenue mobilisation for natural calamities – The Council allowed Kerala to levy a 1% disaster cess on intra-state sale of goods and services.

This will be for a period of up to 2 years to mobilise revenues to meet the cost of rehabilitation after the recent floods.

Lotteries – A group of ministers shall be constituted to examine the GST rate structure on lotteries.

What is the significance?

The change on exemption threshold will benefit the MSMEs sector which is suffering from the twin effects of demonetisation and GST.

The GST Council seems to have finely balanced the need for providing relief and the concern about slipping revenue collections.

It has clarified that most of these exemptions will come into effect on April 1, the next financial year.

So the impact on revenue collections for this fiscal year has been rightfully avoided.

Significantly, the GST Council also did not make any changes to the tax rates of items and allowed things to settle down.

What lies ahead?

Repeated interventions in the form of exemptions and other reliefs can create confusion.

There are also concerns with the rising level of frauds (especially on claiming input tax credit) and tax evasions in the GST.

A better idea will be to go in for real reforms by bringing petroleum, the electricity duty and real estate under the GST.

This will cut out the cascade of taxes, raise transparency and widen the tax base.

The GST Council should now focus more on these issues so that the process works smoothly, leading to greater revenue mobilisation.